(Yicai Global) June 22 -- MSCI Inc.'s [NYSE:MSCI] decision to incorporate China's A-share market into the MSCI Emerging Markets Index and the MSCI World Index will positively affect China's stock market by facilitating capital inflow, a report from renowned international rating institution Moody's said.
The inclusion of A-shares will pave the way for global investors to inject capital into China's A-share market, the report said.
Over USD11 trillion of global invest capital currently uses MSCI indexes as a benchmark, Moody's said. Initially, when A-shares are added to the MSCI Emerging Market Index, USD11 billion are projected to flow into the Chinese market, based on an A-share weighting of 0.73 percent, the report said.
Though international investors are still concerned about restrictions as well as market access and asset remittance issues, the Chinese government is expected to further open up the market and the weighting of A-shares in the MSCI Emerging Markets Index may increase to 20 percent in the next few years, Moody's said.
The comprehensive inclusion of A-shares into the MSCI indexes would stimulate the yuan's internationalization and strengthen investor confidence, the report said. Increasing engagement of foreign investors improves Chinese corporate governance, making Chinese securities more suitable for indexes and passive investment.
With more international institutional investors involved in the domestic A-share market, the retail investor-led Chinese stock market will gradually align with mature international markets, Moody's predicted.